Albert R. and Phyllis F. Dworkin - Page 25

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            (1986); Donahue v. Commissioner, T.C. Memo. 1991-181, affd.                                    
            without published opinion 959 F.2d 234 (6th Cir. 1992), affd. sub                              
            nom. Pasternak v. Commissioner, 990 F.2d 893 (6th Cir. 1993).                                  
                  We held in Provizer v. Commissioner, supra, that each                                    
            Sentinel EPE recycler had a fair market value not in excess of                                 
            $50,000.  Our finding in the Provizer case that the Sentinel EPE                               
            recyclers had been overvalued was integral to and inseparable                                  
            from our finding of a lack of economic substance.  Petitioners                                 
            conceded that the Northeast transaction was similar to the                                     
            Clearwater transaction described in Provizer v. Commissioner,                                  
            supra, and that the Northeast transaction lacked economic                                      
            substance.  Given those concessions, and the fact that the record                              
            here plainly shows that the overvaluation of the recyclers was                                 
            the principal reason for the disallowance and concession of the                                
            investment tax credits, we conclude that the deficiency caused by                              
            the disallowance of the investment credits was attributable to                                 
            the overvaluation of the Sentinel EPE recyclers.                                               
                  Finally, we consider petitioners' express argument as to                                 
            waiver of the penalty.  At trial and on brief, petitioners                                     
            contested imposition of the section 6659 addition to tax on the                                
            grounds that respondent erroneously failed to waive the penalty.                               
            Section 6659(e) authorizes respondent to waive all or part of the                              
            addition to tax for valuation overstatements if taxpayers                                      
            establish that there was a reasonable basis for the adjusted                                   
            bases or valuations claimed on the returns and that such claims                                

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